Glacier FarmMedia | MarketsFarm — Tariff threats from United States President Donald Trump and weather concerns at home and abroad created roller-coaster rides for U.S. grain futures during the week ended Jan. 22.
Just hours after being sworn in for a second term as commander-in-chief on Jan. 20, Trump said 25 per cent tariffs on U.S. imports of Canadian and Mexican goods were not being enacted immediately, but rather most likely on Feb. 1. The next day, he floated the idea of 10 per cent tariffs on goods from China and the European Union.
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Ryan Ettner, broker for Allendale Inc. in McHenry, Ill., said any tariff proposal will take precedence in the eyes of the trade. Prices at the Chicago Board of Trade lifted when it was believed tariffs would not be implemented immediately on Jan. 21. However, after Trump’s remarks on Chinese and European goods, the markets shifted lower.
“We’ll have to check tariff headlines every single day,” Ettner said. “The 10 per cent number is still way off from his original 60 per cent number he was talking about before. But if he just mentions a 10 per cent tariff, soybeans are down and pretty much all we’re trading right now are headlines.
“The core fundamentals still suggest US$5.20 (per bushel for March) corn and US$11/bu. beans. (They) do still project higher.”
The Gulf Coast region of the U.S. was disrupted by the most severe winter storm in its history on Jan. 20, bringing snow, rain and cold temperatures from Florida to Texas. The system also caused concern for U.S. winter wheat-growing areas.
While U.S. wheat futures reacted bullishly to the storm on Jan. 21, expectations moderated the next day.
“You get a pretty sizable one-day initial reaction. And then sure enough (on Jan. 22), analysts are saying, ‘It was cold, but we don’t know (if there was) any damage yet,’” Ettner said.
Meanwhile, persistent drought in some South American corn- and soybean-growing areas are also raising questions regarding current crop conditions.
“The debate there is sort of like wheat. Was damage done from the recent heat and dryness or will (upcoming) rains take care of all that?” Ettner said. “Different analysts down there are saying different things. Some say it’s fine; others say it’s a disaster.”
Recently, China rejected Brazilian soybean shipments from five different firms, including Cargill and ADM, for phytosanitary issues, according to news reports.
Ettner reiterated that US$5.20/bu. for corn and US$11/bu. for soybeans are “base levels”.
“That’s what we feel we can get to as long as a large headline doesn’t pop up,” he said. “Headlines will chop us up and down on a daily basis, but the overall target is still for hire for corn and beans … But if there’s a 50 per tariff headline tomorrow, that changes.”
